As people slowly make their way back to the office, the Real Estate Institute of New Zealand (REINZ) is warning landlords that they now have less than six months to insulate their rental properties or they could face a fine of up to $4,000 from the Ministry of Business, Innovation and Employment (MBIE).

Any landlords who still don’t comply after paying the penalty, may face further action according to MBIE.

Bindi Norwell, Chief Executive at REINZ says: “From 1 July 2019 ceiling and underfloor insulation will be compulsory in all rental homes across New Zealand. That deadline is now less than six months away, and MBIE has warned that it will be proactively checking up on landlords to ensure their rental properties meet the requirements under the Residential Tenancies Act (RTA) by the deadline.

“Landlords need to assess their current insulation, check whether insulation can be installed and the install or top up their insulation as required,” continues Norwell.

“The insulation requirements were announced under changes made to the RTA back in 2016, and last year MBIE was already warning landlords that it would be increasing its enforcement capabilities and that it ‘made no apologies for their approach’ so landlords need to act now if they want to avoid a fine of up to $4,000,” warns Norwell.

“One of the main issues is that there are still a significant number of rental properties around the country that need insulation and the Insulation Association of New Zealand has already stated that it is gravely concerned about the number of rental properties still to be insulated,” points out Norwell.

“One other point that many landlords haven’t picked up on is that they then must ensure that all new tenancy agreements must include a separately signed insulation statement covering what insulation the home has, where it is, and what type,” she continues.

While REINZ has been making a strong effort to communicate with its members who are property managers, as there is no regulation and no governing body for property managers there is a high chance that a number of property managers around the country will not have ensured that their landlords meeting the requirements by 1 July. If the industry was regulated, this could reduce the chance of the legislation not being adhered to by rogue property managers.

REINZ has welcomed the insulation requirements as this will help to improve New Zealand’s housing stock and also improve the health and wellbeing of our rental population.

“With home ownership at its lowest level in 60 years, more and more Kiwis are renting, so it’s essential we protect the health of those renting to ensure we prevent respiratory and skin infections that can be prevented by inadequate housing,” concludes Norwell.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

66 Comments

And owner/occupiers don’t have to have any insulation whatsoever.
Why are landlords being treated differently?
Housing NZ are going to get heavily fined because there houses are generally the most cold and damp rentals around bar none!

Operating as a landlord is a business venture, providing a product/service to a customer. Given that all other businesses must ensure their products are fit for use, it only makes sense that this extends to the landlord.

An owner occupier provides a service to only himself meaning that there is no moral hazard in providing a product of service of substandard quality.

But hey. Keep on whinging about it despite your continued insistence that neither economic of legislative changes will affect your financial position.

I'm surprised he's whinging so much, he has repeatedly said all his houses are already insulated (except one he just bought IIRC), so why would he care, he doesn't have to do anything about it apparently. And with all the positive gearing he claims to have insulating one house shouldn't be a problem.

HNZ spends a lot on its properties and Im sure they are no more exempt on this than anyone else. Just burn some of your high equity position and get it done. Or better yet, save some cash and install it yourself which will be much more productive than daily posting repetitive stuff on online blogs?

I think there is a valid point here, the healthy homes was to ensure a healthy warm envoirment for Kiwi's to live in and hopefully improve overall health for the country. It makes sense to me that all houses rented or owner occupied meet the same standard for everyone in NZ so the whole country benefits.

The difference is there is nothing stopping a homeowner from doing it to their own home, and plenty of incentive to do it (it reduces their power bills, increases their homes livability and increases the value of their asset). No sane tenant is going to pay to insulate somebody else's asset, and as we have seen there is little incentive for slumlords to insulate their rental properties, unless you set a standard and threaten them with a stick.

What about the traditional south Auckland skyline garage
Do they get exempted from insulation
They house a lot of people even out west
The old kiwi number 8 wire ingenuity
Most Auckland homes don’t have ducted central heating
Can’t say our Remuera mansion was ever warm in winter either

Err, we are paying for use of the house.. but just like other rental equipment providers (rental car companies, equipment rentals etc) you need to meet the minimum standards for what you are renting out.

Owner occupied cars are subject to different standards than rentals/taxis etc. Regular owner occuipied cars get WOFs, rentals and taxis get COFs.

and yes, Standards change, its called progress.. Who decides the standards? That would be the appropriate govt department or the MPs/select committees with advice from the various departments. Its called representative democracy.

To be fair NZ landlords are predominantly mom & pops trying to save a nest egg for retirement
I knew a Auckland traffic warden with multiple rental houses yet he owed far more than he was worth
If you want to waste your life cleaning up after tenants & wasting valuable golf fishing sailing & diving time
then rental housing management is for you
Personally I’m glad to be cashed up & out

Yes and no. They’re trying to get the next generation to fund their retirement so they can maintain their frivolous lifestyle. And that’s cool, but if they’re going to do that then be serious about it and apply some real standards so the next generation aren’t being forced to pay through the nose to live in a hovel because they were born in the wrong year.

Landlords are lovely mom and pop investors when it suits; but when it comes to getting some tax back they are genuine businesses that shouldn't be treated different to other businesses, etc.
Well if you want to own a business, you have to ensure your product is safe for consumption. Insulation seems very minor and obvious compared to what most real businesses are subjected to.

So investing in a Auckland house to rent to people is a “Business”
More like a public service
Declining capital gains, more regulations, less tax advantages all make it a poor business decision for capital

And what happens when a business becomes unpopular? The value of the business drops. Win/win - unless you are a landlord (in which case you just got some massive tax free capital gains so stop whinging).

Text book case of dictating the process rather than measuring outcomes. There should be temperature probes and blower door tests up the landlord's back door to measure how well the house holds heat/air.

Instead there are ridiculous short cuts; "Inaccessible" spaces, metal window frames, bathroom fans leaking air and noise, concrete foundations with no insulation at all. Truth is even the new houses are built like crap thanks to our building code which stifles innovation and price competition.

All our homes are totally up to scratch with the new requirements!
All have at least one newish Heatpumps, some with several!
Never had a single complaint about house or unit beimg cold, some even saying they need the heat pump on for cooling!
We are not getting out of the business of providing accommodation for those that don’t want to own a home, as the returns remain very good, despite new regulations that are trying to screw landlords!

Insulation only prevents conduction of heat - you also need to account for radiation (direct sunlight) and thermal mass movement (drafts). A well insulated house that gets lots of sunlight will heat up quickly then only lose heat slowly.

These property investors may or may not be financially literate people.

Even if they are financially literate people, some of their initial assumptions may subsequently prove to be incorrect, some may not have allowed for sufficient financial flexibility in their calculations for unexpected costs / outgoings. Here are some assumptions that may have been made at the time of purchase and may subsequently proved to be incorrect, thereby potentially putting them under some financial stress

1) unexpected cost of healthy homes bill to provide insulation - especially investors who purchased their property before this was even being discussed in parliament, or raised by politicians
2) overly optimistic assumptions of rental increases in the future
3) property prices doubling every 10 years
4) negative gearing for property investors to continue indefinitely

and the key one -
5) assuming that the interest only mortgage used to finance the purchase can be rolled into another one at the end of the interest only period and kept on an interest only basis indefinitely.

This is possible for borrowers classified by banks as business borrowers and commercial borrowers (who are subject to different loan covenants), but a potentially faulty and financially fatal one for borrowers where banks have classified them as a consumer borrower. Many property investors who own 1-3 investment properties are likely to be classified as a consumer borrowers by banks, and may be unable to meet the banks more recent stringent credit criteria (such as 7-8% stress interest rate payments on a P&I basis) and then be unable to refinance with the bank on an interest only basis. As a result, there are a number of consumer borrowers refinancing and moving their borrowing to non bank lenders.

Remember that the non bank lenders have a much smaller lending capacity than the banks (and hence can only refinance a limited number of borrowers), so what happens when a consumer borrower with a loan from a bank on interest only mortgage terms is unable to refinance with a non bank lender? If this property investor is unable to make the higher P&I payments to the bank (or has to drastically cut back on their personal lifestyle to make those higher payments), what will that property investor do then?

Then the follow up question is, what if there are a large number of these consumer property investors experiencing this at the same time?

I recently read about a investor who owned a property investment in Auckland - they purchased the property in early 2016, using 100% finance on an interest only basis (using those 'equity release' / ' deposit recycling' financing strategies that some property mentors were recommending). They were negatively geared, and it was costing them about 100 per week as the interest cost more than absorbed all the net rentals (after operating costs such as rates, insurance). Their loan was becoming a P&I loan where the total cash that they would need to pay to maintain ownership of the property would increase from 100 per week to 350 per week. They were talking about changing their lifestyle to cut costs or they were considering selling.

A question for the knowledgeable readers here.
Does a unit with a concrete floor, (tray deck style) with parking underneath need insulating to meet the requirements. If so, as there are no joists and only a flat steel tray to affix insulation to, what to use as insulation and how to attach.
Thanks for any comments and advice.

Yep, I'm sure Expol can recommend a good adhesive. Also, if the steel has a regular profile you could get Expol to cut the poly to suit the profile to eliminate gaps that could become nice little rat walkways and moisture traps.

Probably be some polyurethane adhesive at $50 a cartridge. In this instance I think it’s a flat steel surface so I think neodymium magnets with Sisilation is the best methodology over Expol which is designed to be cut down to suit joist/cavity installation.

I cant see why you would need too. Concrete floors against the ground need vapour barriers, but in your case if tray deck is used you have a galvanised steel barrier under the concrete and it isnt in contact with the ground, so I would guess no is the correct answer.

I have a building like this and I have a layer of insulation under it, then iron under that again. Looks OK.

It was actually done for sound not thermal reasons, but you could do thermal insulation the same way.

But also remember that new builds have to meet insulation in various ways, so for instance you can have very high insulation in the ceilings and walls, then maybe none in floor. It has to add up to a particular value.

Mrs the point - the answer is no you dont have to insulate a concrete floor. The key wording is "where it is reasonably practicable to install". Exceptions listed here. Also from a tax perspective, so long as you're "replacing" the insulation then it's tax deductible. If you're putting new insulation in then it's a capital improvement. That's my understanding anyway.

Insulation companies wouldn't have made a cent if rental properties were already insulated to a reasonable standard.
If they passed a law saying all rental cars must have air bags, I doubt mechanics would make much money because rental companies have kept up with modern standards.

Good thing the rental market is immune to economic fundamentals so this will have no impact on rents. Rent is capped by what tenants can afford to pay and we are already beyond that. Just like how there would be no impact on rent if it was made mandatory for rentals to come with a spa pool, gym, sauna and double garage.

Yes. Sadly, the two upvotes I got are probably from people who believe that statement. Deeming warm, dry accomodation to be a human right is very nice, but it certainly doesn’t render the rental market immune to economic forces.

Alternatively it could lower the margin on investment properties and hence the value of those 'businesses'. Businesses can't always pass on cost increases, there is no economic force that says they can...

BIG SAVINGS ON

BIG CURRENCY TRANSFERS

Currency rates on this page are supplied for indication purposes only, and may or may not be rates offered by any institution. We source this data from publicly available sources, at the time shown above. Rates change often, and different institutions are competitive in different currencies. Contact institutions directly for actual quotes. The comparisons on this tool are controlled by interest.co.nz.